Europe's central bank maintains interest rate with economic growth
resilient
[February 06, 2026] By
DAVID McHUGH
FRANKFURT, Germany (AP) — The European Central Bank left interest rates
unchanged Thursday as the economy in the 21 countries that use the euro
chugs past the disruption from U.S. President Donald Trump’s tariffs
with modest yet resilient growth.
The bank left its benchmark deposit rate at 2%, where it has been since
June. after a series of cuts from the peak of 4% starting in mid-2024.
“The economy remains resilient in a challenging global environment,”
bank President Christine Lagarde said, opening her post-meeting news
conference. She said growth is being supported by low unemployment,
increased government spending on defense and infrastructure, and the
past series of rate cuts.
“At the same time, the external environment remains challenging owing to
higher tariffs and a stronger euro," she said.
She said “our monetary policy is in good shape” and offered no
indication of future rate moves, saying that the bank would make
decisions “meeting by meeting... in this world of signicant
uncertainty.”
The reduced rate has been low enough to re-start mortgage lending for
home sales and new construction due to reduced credit costs, boosting
growth. Low unemployment is also contributing to demand for goods by
consumers and helping keep the economy resilient without the stimulus of
further rate cuts.
As a result, the chief monetary authority for the eurozone may leave its
rates unchanged into 2027, analysts say. The eurozone grew a stronger
than expected 0.3% in the last three months of 2025, and may reach
growth of 1.3% for all of this year, according to forecasts by Berenberg
bank.
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President of the European Central Bank (ECB) Christine Lagarde
speaks at the press conference after the Governing Council meeting
of the ECB, in Frankfurt, Germany, Thursday Feb. 5, 2026. (Florian
Wiegand/dpa via AP)
 Growth prospects have brightened due
to anticipation of higher spending on infrastructure and defense by
Germany, the eurozone’s biggest economy. In France, the culmination
of Prime Minister Sebastien Lecornu’s long and difficult battle to
enact a 2026 budget -- eventually using special powers to force it
through a deadlocked parliament without a vote -- lifted a dark
shadow from the No. 2 eurozone economy.
Meanwhile energy costs have abated since a painful
spike in the wake of Russia’s invasion of Ukraine in 2022.
Europe weathered months of uncertainty as Trump threatened to raise
tariffs to levels that could have choked off much of Europe’s trade
with the US. In the end, a deal with the EU’s executive commission
capped the tariff rate at 15%, a sharp increase from 4.8% previously
but not as bad as feared. The deal removed uncertainty and let
businesses plan. That’s despite Trump’s brief threat to add more
tariffs on some EU countries that opposed his demands for a US
takeover of Greenland.
Inflation has fallen to below bank’s target of 2%, coming in at 1.7%
in January. Economists at Berenberg said they expect the bank to
leave rates unchanged until strengthening growth calls for a rate
hike in mid-2027. Rate hikes combat inflation by raising credit
costs and dampening demand for good bought on credit, from houses to
new factories.
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